BG Group to sell Comgas stake for $1.8bn as profits rise

BG Group said it is to sell its majority stake in Brazilian gas distribution
business Comgas to Cosan, the South American country's largest gas
distributor, for $1.8bn (£1.1bn) as it unveiled strong first-quarter
profits.

BG Group's Bongkot South platform, offshore Thailand.

8:52AM BST 03 May 2012

The British oil and gas producer said it was offloading the 60pc stake to focus on developing more profitable upstream opportunities in Brazil and around the world.

BG Group

Sir Frank Chapman, the BG chief executive, said the disposal was part of the group's plan to release around $5bn of capital over the next two years via strategic divestments.

Total operating profits in the first quarter rose 21pc to $2.4bn. This was boosted by a 5pc rise in production to 670,000 barrels of oil equivalent a day (boepd), by the high oil price, and by strong continuing demand for LNG in Asian markets.

Sir Frank said the group was making rapid progress in its major projects, especially in Brazil with the development of the 'big five' Santos Basin discoveries.

On the gas leak at Total's Elgin platform in the North Sea, in which BG Group holds a 14.11pc interest, Sir Frank said: "We continue to work closely with the operator, Total, to ensure the issue is resolved in a safe and timely manner."

The company said the Elgin field had been expected to contribute 6.4m boe this year and had contributed 1.3m boe by the time the production was shut down for the gas leak, on March 25.

Analysts at RBC Capital Markets said the numbers bettered both their own forecasts and consensus preductions by a "comfortable margin". However BG Group shares fell 2.8pc to £14.11 a share in early trading.

Tony Shepard, analyst at Charles Stanley, said the Comgas sale was "a welcome move to focus the Group" and the first-quarter results were "strong". Noting the drop in share price, he suggested: "Possibly, some are disappointed that there is no upgrade to guidance, but more specifically reference to rising industry costs especially in Australia may have unsettled some investors."

BG Group said that its Queensland Curtis LNG project was "making good progress towards first LNG in 2014, in a busy Australian construction environment", but warned: "Increasing costs for local goods and services, although mitigated through early implementation and contracting strategies, are clearly evident from ongoing upstream tendering".

The company now estimates that the investment of $15bn that had been sanctioned would "increase by 19pc due to local market effects, increased costs of compliance with regulatory processes and some scope change."